INCOME TAXES

The components of (loss) income before taxes for the years ended December 31 are as follows:



Origin of income before taxes	2015			2014			2013
United States	$	(9,763	)	$	(25,142	)	$	6,025
Foreign	1,140			(661		)	1,840
(Loss) income before taxes	$	(8,623	)	$	(25,803	)	$	7,865

Significant components of income tax (benefit) expense for the years ended December 31 are as follows:



	2015			2014			2013
Current:
Federal	$	(1,155	)	$	158		$	1,114
State	14			(34		)	334
Foreign	120			1,108			836
Total current	(1,021		)	1,232			2,284
Deferred:
Federal	4,143			(7,260		)	642
State	548			(959		)	(78		)
Foreign	87			(1,091		)	(84		)
Total deferred	4,778			(9,310		)	480
Income tax (benefit) expense	$	3,757		$	(8,078	)	$	2,764

A reconciliation between the provision for income taxes calculated at the U.S. federal statutory income tax rate and the consolidated income tax expense in the consolidated statements of operations for the years ended December 31 is as follows:



	2015		2014		2013
Provision at the U.S. federal statutory rate	(34.0	)%	(34.0	)%	34.0	%
State taxes, net of federal benefit	(5.2	)%	(3.6	)%	1.9	%
Foreign tax rate differential	(0.6	)%	0.1	%	(2.5	)%
Valuation allowance	72.3	%	1.2	%	2.9	%
Other true up	7.8	%	(0.4	)%	(4.2	)%
Stock-based compensation	—	%	—	%	(0.4	)%
Intangible assets impairment and other non-deductibles	2.2	%	5.9	%	—	%
Other	1.1	%	(0.5	)%	3.4	%
Income tax expense (benefit) effective rate	43.6	%	(31.3	)%	35.1	%

The deferred tax assets and liabilities at December 31 are as follows:



	2015			2014
Deferred tax assets:
Stock compensation expense	$	3,394		$	4,631
Goodwill	2,673			3,110
Royalty accruals - BJFT	992			—
Bad debt allowance - BJFT	333			—
Inter-company interest expense accrual - US tax	476			—
Net operating loss carryforwards	1,576			2,006
Credit carry-forwards	359			—
Other	637			2,419
Total deferred tax assets	10,440			12,166
Deferred tax liabilities:
Depreciation	(777		)	(1,096		)
Intangible assets	(294		)	(1,156		)
Other	(306		)	(306		)
Total deferred tax liabilities	(1,377		)	(2,558		)
Net deferred tax asset before valuation allowance	9,063			9,608
Valuation allowances for deferred tax assets	(7,832		)	(2,006		)
Net deferred tax asset	$	1,231		$	7,602

Net deferred tax assets and liabilities are recorded as follows within the consolidated balance sheets:



Current assets	$	239	$	1,953
Long-term assets (liabilities)	992		5,649
Net deferred tax asset	$	1,231	$	7,602

The change in the valuation allowance for deferred tax assets for the years ended December 31 is as follows:



Year	Balance at January 1		Charged to costs and expenses	(Deductions)/Other		Balance at December 31
2013	$	1,868	—	(35	)	$	1,833
2014	$	1,833	—	173		$	2,006
2015	$	2,006	6,625	(799	)	$	7,832

For the years ended December 31, 2015, 2014 and 2013, we recorded tax benefits from the exercise of stock options in the amount of $0, $7 and $67, respectively. This amount was recorded as an increase in additional paid-in capital on the consolidated balance sheet and as cash from financing activities on the consolidated statements of cash flows. We also reduced the deferred tax asset related to stock-based compensation by $908 and $379 for fully vested options that expired unexercised and by $421 and $58 for the excess of stock-based compensation over the related tax benefit recognized for restricted stock units that vested during 2015 and 2014, respectively. These reductions in deferred tax assets were recorded against additional paid-in capital and had no impact on our results from operations.

As required by ASC 740, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

The following table summarizes our unrecognized tax benefit activity (excluding interest and penalties) during the years ended December 31, 2015, 2014 and 2013:



Description	2015			2014		2013
Balance at beginning of period	$	117		$	65	$	39
Increases in positions taken in a current period	38			52		65
Decreases due to settlements	(15		)	—		(39		)
Decreases due to lapse of statute of limitations	—			—		—
Balance at end of period	$	140		$	117	$	65

We recognize interest and penalties related to unrecognized tax benefits in income tax expense for all periods presented. The amount of interest and penalties that we recognized in income tax expense during the years ended December 31, 2015, 2014 and 2013 was $0, $0 and $0, respectively. The total amount of unrecognized tax benefits as of December 31, 2015, 2014 and 2013, including interest and penalties, was $140, $117 and $65, respectively, all of which if ultimately recognized will reduce our annual effective tax rate. None of the unrecognized tax benefit will be recognized into income in 2016 due to the lapsing of statutes of limitations.

We are subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2012. We underwent examination for federal tax and state of Illinois purposes for the 2010 and 2011 tax years, and any potential tax obligations in those jurisdictions have been settled, or effectively settled, and are no longer subject to tax examination.

Management periodically estimates our probable tax obligations using historical experience in tax jurisdictions and informed judgments. There are inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which we transact business. The judgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to or further interpretations of regulations. If such changes take place, there is a risk that the tax rate may increase or decrease in any period. Tax accruals for tax liabilities related to potential changes in judgments and estimates for both federal and state tax issues are included in current liabilities on the consolidated balance sheet.

The investment in our foreign subsidiaries is considered to be indefinite in duration and therefore we have not provided a provision for deferred U.S. income taxes on the unremitted earnings from those subsidiaries. A provision has not been established because it is not practicable to determine the amount of unrecognized deferred tax liability for such unremitted foreign earnings and because it is our present intention to reinvest the undistributed earnings indefinitely.

As required by ASC 740, a valuation allowance must be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. At December 31, 2015, we recorded a full valuation allowance of $6,554 on our United States (US) deferred tax assets since we cannot anticipate when or if we will have sufficient taxable income to utilize the deferred tax assets in the future. We have approximately $420 of US net operating loss carryforwards available to offset future US taxable income as of December 31, 2015. The net operating loss carry-forwards related to tax losses generated in prior years in the US begin to expire in 2035. Further, we have tax loss carry-forwards of approximately $4,473 available to offset future foreign income in Italy as of December 31, 2015. We have recorded a full valuation allowance against the resulting $1,230 deferred tax asset because we cannot anticipate when or if this entity will have taxable income sufficient to utilize the net operating losses in the future. There is no expiration of the net operating loss carry-forwards related to tax losses generated in prior years in Italy.